CONTENTS Title Page Dedication Epigraph Preface to the Second Edition Acknowledgments PART ONE: OVERTURE 1 Welcome to the 80/20 Principle 2 How to Think 80/20 PART TWO: CORPORATE SUCCESS NEEDN’T BE A MYSTERY 3 The Underground Cult 4 Why Your Strategy Is Wrong 5 Simple Is Beautiful 6 Hooking the Right Customers 7 The Top 10 Business Uses of the 80/20 Principle 8 The Vital Few Give Success to You PART THREE: WORK LESS, EARN AND ENJOY MORE 9 Being Free 10 Time Revolution 11 You Can Always Get What You Want 12 With a Little Help from Our Friends 13 Intelligent and Lazy 14 Money, Money, Money 15 The Seven Habits of Happiness PART FOUR: FRESH INSIGHTS—THE PRINCIPLE REVISITED 16 The Two Dimensions of the Principle Notes and References About the Author Praise for The 80/20 Principle Copyright To Lee “For a very long time, the Pareto law [the 80/20 Principle] has lumbered the economic scene like an erratic block on the landscape: an empirical law which nobody can explain.” —JOSEF STEINDL “God plays dice with the Universe. But they’re loaded dice. And the main objective is to find out by what rules they were loaded and how we can use them for our own ends.” —JOSEPH FORD “We cannot be certain to what height the human species may aspire…. We may therefore safely acquiesce in the pleasing conclusion that every age of the world has increased, and still increases, the real wealth, the happiness, the knowledge, and perhaps the virtue, of the human race.” —EDWARD GIBBON PREFACE TO THE SECOND EDITION I wrote this book in South Africa in 1996, and came to London in the so-called summer of 1997 to launch it. I remember traipsing from radio station to television station, usually to find that my slot had been pulled at the last minute. When I did get on the air, nobody seemed very interested in the findings of an obscure Italian economist in the dying years of the nineteenth century. “Oooh,” one celebrity of the minute crooned on a talk show, “what are you doing here if you didn’t come up with this idea yourself?” I would like to say that, without missing a beat, I mentioned the influence of Saint Paul and the gospel writers in doing the heavy lifting for the ideas of one Jesus of Nazareth, who would otherwise have been unknown. I would like to say that, but in fact I was lost for words. I returned to Cape Town, thoroughly dejected. And then, a minor miracle. The British publisher who had commissioned the work, a man well known for looking on the gloomy side, faxed me (remember faxes?) to say that despite the PR fiasco, the book was “selling very well.” In fact, the book has sold more than 700,000 copies worldwide and been translated into twenty-four languages. More than a century since Vilfredo Pareto noted the consistently lopsided relationship between inputs and outputs, and a decade since this book reinterpreted Pareto’s principle, I think we can now say that the principle has stood the test of time. There has been massive feedback, mainly positive, from readers and reviewers. Throughout the world, a large number of individuals, perhaps hundreds of thousands, have found the principle useful, at work and in their careers, and increasingly in the whole of their lives. The 80/20 Principle has two almost opposite appeals. On the one hand, it is a statistical observation, a proven pattern—solid, quantitative, reliable, hard. It pleases those who want to get more out of life, to get ahead of the crowd, to increase profits or decrease effort or costs in the pursuit of gain, to dramatically raise efficiency, defined as output divided by input. If we can spot the few cases where the results relative to effort are so much greater than usual, we can become so much more efficient in whatever task we want to accomplish. The principle allows us to enhance our achievement while escaping the tyranny of overwork. On the other hand, the principle has a totally different side—soft, mystical, eerie, almost magic in the way that the same pattern of numbers crops up everywhere, and related not to efficiency at all but to everything that makes our lives worthwhile. The sense that we are connected to each other and to the universe by a mysterious law, which we can tap into and which can change our lives, generates a sense of wonder and awe. Looking back, I think what was different about my book was that it extended the domain of the principle. It had previously been well known in the business arena to increase efficiency. As far as I know, it had never previously been deployed to enhance the quality and depth of our whole lives. It’s only in retrospect that I have fully realized the dual nature of the principle, the curious but perfect tension between its two sides, hard efficiency and soft life enhancement. As I explore in the new chapter of the book, this tension represents the “yin and yang” of the principle, the “dialectic,” where efficiency and life-enhancing uses of it are “complementary opposites.” Efficiency clears the space for life enhancement, while life enhancement requires us to be clear about the few things that are really important in our work, relationships, and all the other activities we do in our lives. Of course, not everyone accepted my reinterpretation of Pareto’s principle. I was surprised at how controversial the book became. While it had its fierce supporters, and a huge number of quiet people who wrote to me saying the book had changed both their professional life and their life as a whole, there were many people who disliked the extension of the principle to the softer side of life, and said so with great clarity and eloquence! The opposition took me aback, but then I came to welcome the contrary voices. They have made me think about the principle more deeply and, as I hope is demonstrated in the final chapter, reach a greater understanding of its dual nature. WHAT IS NEW ABOUT THIS EDITION? To start with, less is more. I have cut out the original final chapter, “Progress Regained.” This was a frankly unsuccessful attempt to apply the 80/20 Principle to society and politics.1 Whereas every other part of the book generated both positive and negative comments, this chapter seems to have fallen entirely on stony ground. The only piece I have retained is the conclusion, which is an appeal to individuals to take action. I have replaced it with an entirely new chapter, “The Two Dimensions of the Principle.” This covers the highlights generated by a decade of reviews, conversations, letters and e-mails, and amplifies and categorizes the best criticisms of the principle, before giving my response. I believe this takes us to a new level of awareness and understanding of the power of the principle. It remains for me to thank everyone who has contributed to the great 80/20 debate. Long may it continue, and thank you all so much. I may have touched your lives, but you have certainly touched mine, and I am most grateful. Richard Koch [email protected] Estepona, Spain, February 2007 ACKNOWLEDGMENTS This has been the most painful and well-researched book I have ever written. There is a certain irony here, since the 80/20 Principle tells us that I could have obtained a book 80 percent as good in 20 percent of the time. This would certainly have been my inclination, and only the reader can tell whether the extra effort has been worthwhile. I think it has, but I have lost all objectivity. The effort involved has been much more collective than for any of my previous books. Don’t believe the false modesty of those who write generously that their books have been “team efforts.” In the end only an author (or authors) can write a book. But I want to thank some individuals without whom this book would either not have existed or would have been vastly inferior. First is Mark Allin, then at Pitman Publishing and now my partner in Capstone Publishing, who first had the idea of the book. Second is Nicholas Brealey, who has put so much intelligent effort into this book that I sincerely hope it pays off for him! According to the Von Manstein principle (see Chapter 13), people like Nicholas who are smart and industrious will not be as successful as those who are smart and lazy. To become a real star, Nicholas must work a great deal less. I have a theory that if he published half the number of books, and put all his effort into these, he’d make even more money. I hope my next book will not be one to get the axe! I am very grateful for his persistence on this book. Sally Lansdell Yeung has been the “third person” collaborating to get the structure and text right. She is clearly a gifted publisher in her own right. Next, my researcher on the book, Nick Oosterlinck, did a terrific job of reconstructing the history of the 80/20 Principle from 1897 to 1997. He has now disappeared from my radar screen, but if he would like to get in touch I would be delighted to dispense some champagne his way. I should also thank not only Mr. Pareto for originating the 80/20 Principle, but also Mr. Juran, Mr. Zipf, Mr. Krugman, and the unsung heroes at IBM in the 1960s for elaborating it. And also the hundreds of people from all walks of life and disciplines who have written magazine articles about the 80/20 Principle, many of whom I have quoted extensively as evidence of the way in which the principle can be used. I have made every effort to acknowledge these people in